Leading indicators rise for second straight month

Hopefully ahead, a light at the end of the tunnel?

WASHINGTON (MarketWatch) - A key gauge of the economy rose slightly in May for a second straight month, indicating that while the economy is very weak, better times may be ahead.

The index of leading indicators, which is released by the Conference Board and attempts to forecast turning points in the economy, rose 0.1% in May, matching April's gain.

"Latest data suggest the economy has not fallen into a contraction and may not undergo one in the second half of the year," said Ken Goldstein, labor economist at the Conference Board. "In fact, the economy might even begin to turn a corner early next year."

Four of the 10 leading indicators that make up the leading index rose in May, with the largest positive contribution from the interest rate spread. The largest negative contribution came from the real money supply.

The coincident index, which measures the current economy, rose 0.1% in May. In the prior month, the index declined 0.1%. The four indicators in the coincident index are the same ones used by the National Bureau of Economic Research to judge whether the economy is in a recession. Of note, the two indicators in the coincident index that rose in May are both Conference Board estimates - personal income less transfer payments, and manufacturing and trade sales.

Elsewhere Thursday, the Labor Department reported that unemployment lines were a little shorter last week as applications for first-time jobless benefits fell by 5,000. But claims were still in the range suggesting weakness in the nation's labor market, despite dropping to a two-week low of 381,000 for the week ended June 14. Read full story.

Also, the Federal Reserve Bank of Philadelphia reported Thursday that factories in the Philadelphia region are being slapped by weaker demand on one side and higher input costs on the other. Read full story.

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